Ritesh Malik vs Assessing Officer Ward 5(2)(2), Noida

PER MANISH AGARWAL, ACCOUNTANT MEMBER:

The present appeal is filed by assessee against the order dated 26.09.2025 passed by Ld. Commissioner of Income Tax (A), National Faceless Appeal Centre (“NFAC”), Delhi [“Ld. CIT(A)”] in Appeal No. NFAC/2020-21/10211727 u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of assessment order dated 27.12.2022 passed u/s 143(3) r.w.s. 144B of the Act pertaining to Assessment Year 2021-22.

Brief facts of the case are that the assessee is an individual and e-filed his return of income on 29.12.2021, declaring total income of INR 80,87,850/-. The assessee is engaged in the business of publishing, printing and reproduction of recorded media under the name and Style of “RITZ Media World”. The case of the assessee was selected for complete scrutiny under CASS and during the course of assessment proceedings, AO observed that assessee has claimed expenses of INR 33,33,938.99 under the head “rebate and discount” given to Three parties for which it was claimed that the said “rebate and discount” were given due to inferior quality of the services rendered to customers who denied making the payments against the invoices raised for such services. However, the AO has not accepted the contention of the assessee and disallowed the said expenses and accordingly, total income of the assessee was assessed at INR 1,14,21,789/-.

Against the said order, the assessee preferred appeal before Ld. CIT(A) who vide impugned order dated 26.09.2025, dismissed the appeal of the assessee by holding that the assessee has made alternate claim of bad debt against “rebate and discount” for which a revised return is to be filed and in absence of which, this claim cannot be entertained.

Aggrieved by the said order, the assessee is in appeal before the Tribunal by taking various Grounds of appeal mentioned in the appeal memo.

Since all the Grounds of appeal are with respect to the disallowance of INR 33,33,939/- without considering the genuineness of the claim made by the assessee therefore, they are taken together for consideration.

Heard the contentions of both the parties at length and perused the material on record. It was the claim of the assessee that during the year under appeal, the payments outstanding in the name of Three parties were claimed under the head “rebate and discount” namely:-

During the course of assessment proceedings, assessee made alternate claim that since these are trade outstanding on account of services rendered in earlier years or in the year under appeal and since the services rendered were as per the specifications provided by the principal therefore, these parties have denied making the payments and therefore the same were claimed as expenses under the head “Rebate & Discount” however, the correct head should be “Bad Debts”. It was the submission that in the event, claim of the assessee as “rebate and discount” is not allowed, the same being in the nature of bad debts therefore, should be allowed u/s 36(1)(vii) of the Act as bad debt. Although, the lower authorities have denied the claim of the assessee for the reason that the assessee has failed to substantiate that the said amounts were offered for tax however, while observing so, both the lower authorities filed to take note of the fact that since beginning of the proceedings, assessee was claiming the outstanding as result of invoices raised against the services rendered in the year under appeal or in preceding years and also the GST charged have already been paid. The invoices so raised were credited to the sales accounts and “rebate and discount” have been reduced from the amounts of sales and debited to the accounts of the respective parties. Once the assessee has established that the said sum was offered for tax and were written off in the books of accounts, the assessee has fulfilled all the conditions for claiming bad debts as per section 36(1)(vii) of the Act. The Hon’ble Supreme court in the case of TRF Ltd. vs. Commissioner of Income Tax reported in 323 ITR 397 (SC) has held that an assessee does not need to prove that a debt has actually become irrecoverable. Merely writing it off as irrecoverable in the books of account during the financial year is sufficient to claim a tax deduction under Section 36(1)(vii) of the Income Tax Act. As observed above, in the instant case, the assessee has been able to demonstrate that the said amounts were written off int eh books of accounts and the income have already been offered for tax and therefore, the assessee is justified in claiming the bad debts of these amounts, we order accordingly. All the grounds of appeal taken by the assessee are thus allowed.

In the result, appeal filed by the Assessee is allowed.